Question

What is accounting equation? Give any five transaction and there treatment in accounting equation?

Answer 1

The Accounting Equation is based on the double entry accounting, which says that every transaction has two aspects, debit and credit, and for every debit there is equal and opposite credit. It helps to prepare a balance sheet, so it is also called the Balance Sheet Equation.

The Accounting Equation is:

Assets = Liabilities + Owners Equity

Or

A = L + OE

Examples:

1) If you Buy a Computer for Business from Business Bank Account worth $1,500

Compter a/c Dr $1,500

to Bank a/c $1,500

2) If you clear an accounts payable using bank account

Accounts Payable a/c Dr $XXX

to Bank a/c $XXX

3) Take a loan from BOA

Bank a/c Dr $XXX

to Loan from BOA $XXX

4) Charge Depreciation to Profit and Loss

Profit and loss a/c Dr $XXX

to Assets a/c $XXX

5) Withdraw cash from Bank

Cash a/c Dr $XXX

to Bank a/c $XXX